IBM Corp., as we all know, is a company that does a lot of things very well. One of the things that IBM does particularly well is keeping outsiders guessing about what it is going to do next.
Big Blue's penchant for secrecy takes many guises. Recently, for instance, one of INC.'s staff writers was curious to find out which smaller companies are involved in the production of the peanut, IBM's forthcoming home computer. So she called the company.
"I wish I could help," an IBM promotion executive told the writer, "but I've never heard of an IBM product called the Peanut." This, at a time when high-technology stocks were taking a dramatic nosedive as a result of rumors about the introduction of IBM's new Peanut!
IBM's obsession with confidentiality and security is nothing new. More than a decade ago, for example, IBM was understandably concerned to discover that one of its own employees was trying to sell a confidential IBM customer list. In an attempt to "sting" the wayward employee, an IBM security agent impersonated the partner of a New Jersey -- based service bureau. When IBM later brought charges against the employee, a New York State judge threw out the case. "The judge told IBM to remember that it was not a law enforcement agency and could not act like one," recalls Richard Imershein, retired director of IBM's competitive analysis group.
Much more recently, IBM orchestrated another sting -- the one chronicled in "Friday the 13th," by Vin McLellan, which begins on page 109 of this issue.
The story focuses on Martin Alpert, founder and president of Tecmar Inc., a small computer company in Cleveland. In June 1982, Tecmar was approached by an IBM employee who claimed he was preparing to leave to start his own company and had "things" -- valuable things -- he wanted to sell. Alpert decided to warn IBM, and, the next morning, IBM security was knocking on his door.
Although Alpert didn't realize it at the time, he was about to land the leading role in a dramatic effort by IBM to trap a group of renegade employees, including some of the best technical minds in the personal computer industry. This sting also ended up in court, where IBM exact ed a series of severe financial and professional concessions from the renegades effectively banishing them for several years from the industry they had helped create.
Surprisingly, the case got scant coverage in the press. To a certain extent, it was overshadowed by the Hitachi sting, in which representatives of Hitachi Ltd. of Japan paid $600,000 to IBM and Federal Bureau of Investigation agents for stolen IBM plans. That case received wide coverage, thanks largely to leaks from IBM, which was eager to dramatize the international embarrassment awaiting overzealous competitors.
In the final analysis, however, the Hitachi case was little more than a footnote in the annals of corporate espionage, an unfortunate practice as old as free enterprise itself. Certainly within IBM, the Tecmar affair had a far greater impact, for IBM used it as a warning to any of its employees who might be having entrepreneurial thoughts on company time.
From that perspective, moreover, the case illustrates how the microcomputer industry is changing some of the rules by which all of us conduct our business. From its inception, after all, the industry has been a hotbed of entrepreneurial activity. Enticed by seemingly limitless opportunities, spurred on by tales of fortunes to be made, encouraged by an abundance of venture capital, who in the industry has not harbored an entrepreneurial thought or two? A company has little choice but to adapt to the pressures of doing business in this kind of environment.
Even as potent a presence in the market as IBM has had to rethink some of its policies -- notably, its legendary employment agreements, which claim virtually everything associated with an individual's employment. Despite those contracts, Big Blue was forced, in August of 1981, to offer payment, in order to spur development of software programs for the IBM Personal Computer. Initially, there was a ceiling of $100,000 for each program; when the rest of the industry scoffed at such miserliness, IBM did away with the ceiling altogether. So why, an outsider might ask, is IBM paying its employees for something it already owns, under terms of its standard employment agreement?
Clearly, IBM is responding to changes in the competitive nature of the marketplace just as surely as the entrepreneur who finds it necessary to part with liberal amounts of equity in order to lure and keep key employees.
Practical and strategic considerations aside, all of this raises some complex and challenging questions about the nature of intellectual property and the relationship between employer and employee. These are, indeed, qiaestions that Martin Alpert was forced to contend with as he carried out his role as undercover agent for IBM. He found the experience unsettling. So do we.
This issue of INC. also contains our "Third Annual Report on the States," beginning on page 139, in which we once again rank the 50 states according to the quality of each one's business climate for smaller companies. As we were putting the finishing touches on the report, Joe Kahn -- a staff writer involved in the project -- ventured to Portland, Maine, for the 75th Annual Meeting of the National Governors' Association. Here, in Kahn's words, is how the chief executive officers of our 50 states spend their time when they are not busy raiding one another's states for business:
"I spent a day at the 75th NGA conference, held this year in Portland, Maine, and although I had personally missed the first 74, this one was not too far from what I had expected. The conference theme was economic-development policy, and much of the agenda was given over to committee meetings and caucuses that in one way or another tackled this broad and thorny issue. Below the surface, to be sure, ran the swifter currents of national politics. Most of the Democratic presidential hopefuls put in an appearance, and Vice-President Bush, who owns a summer home just down the road in Kennebunkport, had everyone over to his place for supper, after which he chewed them out for proposing to raise taxes. But I must say I had the feeling that the states' chief executives really were more interested this time around in getting a handle on sound economic policy than they were in handicapping Reubin Askew's chances in the 1984 New Hampshire primary. Political races come and go, after all, but state venture capital pools and aging infrastructures do not blow in quite the same winds. If, as Bush insisted, national economic recovery is at hand, you would still have a hard time convincing all the governors that state prosperity is just around the corner.
